LividBovine
The Year of the Cow!
+175|6350|MN
Source

Man, I really didn't think it was true.  I really wanted to blame the people for being stupid enough to get loans they couldn't afford.  I know banks were taking advantage of a good situation and all, but geez.

Does the new financial controls legislation do enough to keep banks from doing this again?
"The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation" - Barack Obama (a freshman senator from Illinios)
Turquoise
O Canada
+1,596|6376|North Carolina
The CRA didn't help things either.

The new finance bill probably doesn't do enough to protect poor minorities, but that's not surprising, because the credit industry is really powerful in our system.

On the other hand, this also underlines the importance of educating minorities about finance in general.
cpt.fass1
The Cap'n Can Make it Hap'n
+329|6667|NJ
CRA's are actually hard loans to qualify for. Also I'm sure the tax abatement's for those regions didn't help any. Well it was done with the best of intentions to lend in poor neighborhoods so people would end up taking more pride in things they own. So instead of squat houses and boarded up homes, you ended up with people getting "predatory loans". 

I'm pretty sure that majority of this area's are ones that are barely staying afloat with state and federal funding. So what's worse, forcing banks to loan money in neighborhoods with high default numbers, or letting those neighborhoods fail?
Turquoise
O Canada
+1,596|6376|North Carolina

cpt.fass1 wrote:

So what's worse, forcing banks to loan money in neighborhoods with high default numbers, or letting those neighborhoods fail?
Honestly, I think the crash showed us that letting these neighborhoods fail is better, because otherwise, it brings down all of us.

I'd rather have pockets of poverty than have the entire country's system on the verge of collapse.

Welfare and work programs can only do so much for the poor.  Beyond that, it's a combination of luck and hard work.

The luckiest and wisest countries are the ones that don't have a sizable poor population to begin with and keep out most of the developing world's poor with regard to immigration.
Phrozenbot
Member
+632|6586|do not disturb

LividBovine wrote:

Source

Man, I really didn't think it was true.  I really wanted to blame the people for being stupid enough to get loans they couldn't afford.  I know banks were taking advantage of a good situation and all, but geez.

Does the new financial controls legislation do enough to keep banks from doing this again?
Blaming the people for being stupid enough to take out these type of loans makes as much sense as blaming this on racism. That isn't what caused the crisis, though it certainly is a problem. Without premium ratings from the rating agencies, the credit default swaps would have never left port. Why do you think CDOs were used for the bonds that couldn't get AA?

New financial controls do essentially nothing different. Derivatives are still largely unregulated and of course, misunderstood by the government, but I am not arguing in favor of regulation of derivatives in themselves, but of fraud found in them and in the financial sector. As long as the government does not enforce the law and prosecute fraud, it will continue to exist.
cpt.fass1
The Cap'n Can Make it Hap'n
+329|6667|NJ
Yes best of intentions, trying to get some economic growth in poor area's. Giving people who live in a neighborhood the chance to own a part of it and pay taxes instead of living in the projects or off of section 8 their whole lives. Also with people being able to buy the homes it pumped money into the area through forms of Developers and created more jobs.

No matter what the downfall(it's really not predatory lending, cause who came out ahead?), it created more jobs and better jobs then opening up a mc donalds or a wallmart in the area.

So how and what do we do to start steering this neighborhoods up?
Turquoise
O Canada
+1,596|6376|North Carolina

Phrozenbot wrote:

LividBovine wrote:

Source

Man, I really didn't think it was true.  I really wanted to blame the people for being stupid enough to get loans they couldn't afford.  I know banks were taking advantage of a good situation and all, but geez.

Does the new financial controls legislation do enough to keep banks from doing this again?
Blaming the people for being stupid enough to take out these type of loans makes as much sense as blaming this on racism. That isn't what caused the crisis, though it certainly is a problem. Without premium ratings from the rating agencies, the credit default swaps would have never left port. Why do you think CDOs were used for the bonds that couldn't get AA?

New financial controls do essentially nothing different. Derivatives are still largely unregulated and of course, misunderstood by the government, but I am not arguing in favor of regulation of derivatives in themselves, but of fraud found in them and in the financial sector. As long as the government does not enforce the law and prosecute fraud, it will continue to exist.
Well, the worst part is that rating agencies are corrupt as hell.

At this point, there's really little way of knowing if a rating is legit or not without digging into the mess to figure things out.

The credit industry is about as scummy as it gets.
Phrozenbot
Member
+632|6586|do not disturb

Legalize drugs.
Turquoise
O Canada
+1,596|6376|North Carolina

Phrozenbot wrote:

Legalize drugs.
That would definitely help.
cpt.fass1
The Cap'n Can Make it Hap'n
+329|6667|NJ
They've already done a thing about the rating agency. When looking back on credit files, they've noticed that people who live in certain area's get larger drop in scores.

Wouldn't a higher car insurance premium for area's be considered racist and predatory?
Phrozenbot
Member
+632|6586|do not disturb

Turquoise wrote:

Well, the worst part is that rating agencies are corrupt as hell.

At this point, there's really little way of knowing if a rating is legit or not without digging into the mess to figure things out.

The credit industry is about as scummy as it gets.
True. The subprime mortgage bonds had prospectuses that made it its own mini corporation (from the Big Short if I remember correctly) if you were to read all the legal jargon. They were very difficult to sift through and looking at the individual loans in these derivatives was near impossible. Derivatives are very opaque, but what do you expect with a financial asset meant to have a sucker at the receiving end?

Turquoise wrote:

Phrozenbot wrote:

Legalize drugs.
That would definitely help.
The question would be, would gang activity be as high with drugs that are now cheap, sold by legitimate businesses instead of criminals, and be able to regulate? That is what I think has done the most harm to those communities. Placing nice lending agencies in the ghetto most white people have the privilege to have won't fix drug torn neighborhoods, or massive imprisonment of minorities for victimless crimes. That is racist.

Last edited by Phrozenbot (2010-10-04 09:26:51)

Phrozenbot
Member
+632|6586|do not disturb

cpt.fass1 wrote:

They've already done a thing about the rating agency. When looking back on credit files, they've noticed that people who live in certain area's get larger drop in scores.
The bonds were using FICO scores but not differentiating thin and thick sheet scores. Two people have the same amazing credit score, but one has a very short credit history, and the other has a very lengthy one. Which one would you say is more reliable to repay their debt, given the choice?
Hunter/Jumper
Member
+117|6325
They made them get loans. Wow !
cpt.fass1
The Cap'n Can Make it Hap'n
+329|6667|NJ

Hunter/Jumper wrote:

They made them get loans. Wow !
Well they made the banks loan out in area's of high default, making the people getting the loans victims because.

Predatory lending is really a bs term. Majority of these people got money out on inflated property value and if anyone believes in the financial system everyone made more money then there house was really worth.

Remember the banks were lending money out on collateral, and right now that collateral isn't worth anything. So who ever borrowed tons of money out on the property shouldn't be complaining cause they got over what there home was worth.
Stingray24
Proud member of the vast right-wing conspiracy
+1,060|6416|The Land of Scott Walker
Racial predatory loans pfffff.  That's what happens when banks are told to lend on fairness and equality instead of good credit and supporting income.
Macbeth
Banned
+2,444|5556

I remember back when Bush was President how around the time when Iraq was raging Fox News and other 'right' news sources where bragging about how under Bush black home ownership was at an all time high.

How did that work out? tongue
Reciprocity
Member
+721|6551|the dank(super) side of Oregon
the practice is referred to as "reverse redlining".
Dilbert_X
The X stands for
+1,810|6077|eXtreme to the maX

JohnG@lt wrote:

It's a self defeating cycle and there isn't a damn thing you can do to protect them from themselves.
But you can regulate banks so they don't bring the entire financial system down when their loans-to-fuckwits scheme, which pays the CEOs such big bonuses, fails.

Last edited by Dilbert_X (2010-10-04 18:14:03)

Русский военный корабль, иди на хуй!
Jay
Bork! Bork! Bork!
+2,006|5329|London, England

Dilbert_X wrote:

JohnG@lt wrote:

It's a self defeating cycle and there isn't a damn thing you can do to protect them from themselves.
But you can regulate banks so they don't bring the entire financial system down when their loans-to-fuckwits scheme, which pays the CEOs such big bonuses, fails.
It wasn't the banks that were doing this lending though. It was sleazy mortgage brokers and bad HUD policy. The financial collapse would not have occurred if Fannie and Freddie did not exist to backstop all the mortgages that were originated. If the banks had to hold the loans on their own books like S&Ls used to, there wouldn't have been such widespread abuse. Loaning to poor customers is a political tool and not something that a bank would ever do. Banks are businesses, not charities. They aren't going to take overly risky bets like giving a loan to someone on Section 8 on their own.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
KEN-JENNINGS
I am all that is MOD!
+2,973|6603|949

this little blurb stood out to me:
Poorer minority areas became a focus of these practices in the 1990s with the growth of mortgage-backed securities, which enabled lenders to pool low- and high-risk loans to sell on the secondary market, Professor Douglas Massey of the Woodrow Wilson School of Public and International Affairs at Princeton University and PhD candidate Jacob Rugh, said in their study.
I really don't get why packaging mortgage securities (among other things) and allowing them to be traded as commodities is a good thing?  The negative impacts far outweigh any positives.  Commodity trading in foodstuffs is going to result in more famine than any drought mother nature could possibly drop on us.
Jay
Bork! Bork! Bork!
+2,006|5329|London, England

KEN-JENNINGS wrote:

this little blurb stood out to me:
Poorer minority areas became a focus of these practices in the 1990s with the growth of mortgage-backed securities, which enabled lenders to pool low- and high-risk loans to sell on the secondary market, Professor Douglas Massey of the Woodrow Wilson School of Public and International Affairs at Princeton University and PhD candidate Jacob Rugh, said in their study.
I really don't get why packaging mortgage securities (among other things) and allowing them to be traded as commodities is a good thing?  The negative impacts far outweigh any positives.  Commodity trading in foodstuffs is going to result in more famine than any drought mother nature could possibly drop on us.
It's actually a fantastic way to get money into the system, far better than the old S&L system ever was. It hooks up investors directly with people who want to buy a home and spreads the risk around without putting any one bank under too much strain in case of a collapse in a local market.

The only negative comes about when there are more investors wanting to buy the bonds than there are reasonable mortgages to give out. This is what ultimately led to the collapse. The market got hyper-hot, sleazy mortgage brokers came in, gave out fake and/or unwarranted loans, had Fannie/Freddie back them, and the risk was dumped on investors who trusted the AAA ratings.

The problem was not with the bonds themselves, it was a whole torrent of mismanagement, fraud, and misguided beliefs in every other sector.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Dilbert_X
The X stands for
+1,810|6077|eXtreme to the maX

JohnG@lt wrote:

The problem was not with the bonds themselves, it was a whole torrent of mismanagement, fraud, and misguided beliefs in every other sector.
And people buying investments they didn't understand.
Русский военный корабль, иди на хуй!
Jay
Bork! Bork! Bork!
+2,006|5329|London, England

Dilbert_X wrote:

JohnG@lt wrote:

The problem was not with the bonds themselves, it was a whole torrent of mismanagement, fraud, and misguided beliefs in every other sector.
And people buying investments they didn't understand.
Whose fault is that? I rarely feel bad for investors. They expect to make easy risk free profits and cry when that doesn't happen. Fuck them. No such thing as a free lunch.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Turquoise
O Canada
+1,596|6376|North Carolina

JohnG@lt wrote:

Dilbert_X wrote:

JohnG@lt wrote:

The problem was not with the bonds themselves, it was a whole torrent of mismanagement, fraud, and misguided beliefs in every other sector.
And people buying investments they didn't understand.
Whose fault is that? I rarely feel bad for investors. They expect to make easy risk free profits and cry when that doesn't happen. Fuck them. No such thing as a free lunch.
That's easy to say until you end up bailing them out through taxes....
KEN-JENNINGS
I am all that is MOD!
+2,973|6603|949

JohnG@lt wrote:

KEN-JENNINGS wrote:

this little blurb stood out to me:
Poorer minority areas became a focus of these practices in the 1990s with the growth of mortgage-backed securities, which enabled lenders to pool low- and high-risk loans to sell on the secondary market, Professor Douglas Massey of the Woodrow Wilson School of Public and International Affairs at Princeton University and PhD candidate Jacob Rugh, said in their study.
I really don't get why packaging mortgage securities (among other things) and allowing them to be traded as commodities is a good thing?  The negative impacts far outweigh any positives.  Commodity trading in foodstuffs is going to result in more famine than any drought mother nature could possibly drop on us.
It's actually a fantastic way to get money into the system, far better than the old S&L system ever was. It hooks up investors directly with people who want to buy a home and spreads the risk around without putting any one bank under too much strain in case of a collapse in a local market.

The only negative comes about when there are more investors wanting to buy the bonds than there are reasonable mortgages to give out. This is what ultimately led to the collapse. The market got hyper-hot, sleazy mortgage brokers came in, gave out fake and/or unwarranted loans, had Fannie/Freddie back them, and the risk was dumped on investors who trusted the AAA ratings.

The problem was not with the bonds themselves, it was a whole torrent of mismanagement, fraud, and misguided beliefs in every other sector.
No, loans and other securities are bundled after the fact - that is, after the loan is already made.  The broker and underwriter make their money up front and alleviate themselves from the risk.  It's not the same thing.

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